1989 (3) TMI 146 - HC - Central Excise

Court upholds bank guarantee encashment, affirms recovery authority under Central Excise Act.

The Court dismissed the petition challenging the encashment of bank guarantees by the respondent, affirming their authority to recover dues in line with ... Demand Issues:Challenge to letters issued by State Bank of Indore and Assistant Collector, Central Excise. Interpretation of the term 'manufacture' under Central Excise Act, 1944. Validity of encashing bank guarantees without certified copy of Supreme Court judgment. Authority to recover dues and encash bank guarantees as per Supreme Court directions.Analysis:The petitioners challenged letters issued by State Bank of Indore and Assistant Collector, Central Excise, regarding encashment of bank guarantees. The dispute arose over the interpretation of the term 'manufacture' under the Central Excise Act, 1944. The Supreme Court admitted a writ petition filed by the petitioners and granted a stay order, requiring the petitioners to furnish bank guarantees. The respondent encashed the bank guarantees based on the Supreme Court judgment without producing a certified copy to the petitioners, leading to the challenge.The Union of India argued that the Supreme Court judgment authorized the encashment of bank guarantees, as it held that processing cloth amounts to manufacture, and the sale price determines excise duty. The Union contended that the petitioners' application aimed to delay payment. The Court noted the Supreme Court's directions, allowing recovery of dues and encashment of bank guarantees within six months from the notices under Section 11A of the Act.The Court found the petition lacked merit as the notices under Section 11A were served within six months, entitling the respondent to recover dues and encash bank guarantees. The bank guarantees were furnished after the determination of the payment difference, eliminating the need for fresh adjudication. Consequently, the Court dismissed the petition, upholding the respondent's authority to recover dues and encash bank guarantees as per the Supreme Court's directions.